The Securities and Exchange Commission is expected to announce civil fraud charges against three former Countrywide executives this afternoon.
Last month the SEC staff sent Countrywide founder and former chief executive Angelo Mozilo and two other executives “Wells letters” notifying them that they were recommending filing insider trading and disclosure violations.
A majority of the SEC’s five commissioners must approve recommendations from the staff to file suit before charges can actually be filed. The commissioners have been meeting this afternoon in closed session. An announcement is expected at 4 PM this afternoon.
It’s been reported that federal prosecutors say they are months away from a decision about whether to bring criminal charges against Mozilo.
Update: CNBC’s David Faber has some details of the case against Mozilo. Here’s an excerpt from the transcript of Faber’s report.
MOZILO SOLD HUNDREDS OF MILLIONS IN COUNTRYWIDE’S STOCK IN LATE 2006 AND 2007, AND STANDS ACCUSED BY THE SEC OF REMAINING PUBLICLY UPBEAT ABOUT HIS COMPANY’S PROSPECTS DURING THAT PERIOD, WHILE HE KNEW THINGS WERE NOT GOOD IN COUNTRYWIDE’S BUSINESS.
HOW THE SEC INTENDS TO PROVE THAT IS UNCLEAR, BUT MOZILO’S CHANGE TO A 10-B 5-1 PLAN UNDER WHICH HE SYSTEMATICALLY SOLD STOCK MAY BE USED AS EVIDENCE OF HIS CULPABILITY.
MOZILO ALLEGEDLY ESTABLISHED ONE 10-B5-1 PLAN IN OCTOBER OF 06 AND ANOTHER IN DECEMBER OF 06 AND THEN REVISED THE OCTOBER PLAN IN FEBRUARY OF 07 SO THAT HE COULD INCREASE HIS SALE OF COUNTRYWIDE STOCK.
A CIVIL CASE SUCH AS THIS FACES A FAR SMALLER BURDEN OF PROOF THAN DOES A CRIMINAL CASE AND IT IS NOTABLE THAT THE SEC’S ACTION IS NOT ACCOMPANIED BY ACTION FROM LAW ENFORCEMENT AUTHORITIES.